Venture capital and IPO options for small businesses may have all but disappeared, but Steve Trussell is still excited by his chances to raise up to $1 million this year to fund his growth plan. Like other entrepreneurs eschewing normal avenues for raising capital, Trussell headed to the Strip--Las Vegas Boulevard. But the Dallas-based CEO wasn't hoping for a lucky pull at a slot machine. He took luck into his own hands by registering for the Nevada state registered offering and looking for investors who want fresh, promising opportunities to sink their money into.

Available to any business in the world, the NSRO allows companies to legally register and distribute company stock shares to Nevada residents and qualified visitors. Small businesses are allowed to offer 1 million shares at $1 per share over a year's time, making it possible to raise up to $1 million in just a few months. These days, there are few other options with such possibility.

"It's less expensive than doing bank financing," says Ed Apenbrink, who retired last year as Nevada's director of securities registration and licensing. "It's more of a sure thing in the sense that banks don't seem to be lending these days."

With limited funding options, dozens of entrepreneurs are making their way to Nevada and adding securities registration and sales to their skill sets. Trussell plans to expand his company, State Continuing Education Inc., which provides online education for state-licensed professionals, chiefly through acquisitions. He went to Nevada last year to raise the money necessary to fund his plan.

"Nevada is a business-friendly state; it's the new Delaware for corporations," Trussell says. "The business climate there makes it a good place to incorporate and raise money." Trussell is still in the fundraising stage of the offering and hopes to raise between $900,000 and $1 million in Nevada this year by self-distributing his stock.

But not every NSRO company is looking for big bucks: While in office, Apenbrink saw numerous offerings for companies planning to raise as little as $10,000 or $20,000.

"A business owner might have a contract to hang drywall in several hundred houses in one subdivision, and he might want to raise $30,000 to buy equipment," he says. "There's no stated minimum, but there is a practical minimum. Sometimes companies just can't do it if they're only raising a small amount because of the costs of compliance."

Those costs include legal fees and accounting fees, but no more than 20 percent of funds raised can go to sales and upfront costs.

Why Nevada?State registered offerings are available in 46 other states, according to Robert Walsh, Nevada's deputy secretary of state. But the Silver State's version of the program includes some distinctions that make it popular with entrepreneurs nationwide. For instance, in most states, registration of securities is on a merit basis; the state can deny registration if it determines that the company may not be viable for investors. Nevada, on the other hand, uses disclosure-based regulation, which requires the issuer to fully disclose its financials and other information to investors, and then leaves it up to investors to take responsibility for their own investment decisions.

Also, when a company registers in Nevada, it can advertise its stock in the state and hold seminars to introduce itself to investors, which is barred in most states. In Nevada, some companies stage investor-education meetings at top Vegas hotels and casinos, hoping to attract high-rolling tourists to sink a little cash into their business. Companies registered in Nevada can sell shares directly to any Nevada resident, as well as visitors who sign affidavits saying they did not come to the state to buy stock. In other words, companies can't advertise outside of Nevada hoping to bring investors to the state for the sole purpose of buying stock. In contrast, most other states require companies to sell state-registered stock through a broker-dealer like Merrill Lynch, rather than issuing it directly, Apenbrink says.

Taxes and timelines also distinguish Nevada's program from those of other states. "Taxes are a lot lower in Nevada as opposed to [California]," says Robert Chang, CEO of Walnut, Calif.-based Najaro, a fruit beverage company, adding that the auditing and approval processes are also a lot faster in Nevada.

Developing a user-friendly state registered offering program was no accident for Nevada's policymakers. "We're very cognizant of the need to strike a balance between regulation and accessibility of [capital] markets, to minimize the burden and expense to businesses while also ensuring the integrity of the capital market," says Nevada Secretary of State Ross Miller, whose office oversees the program. "There's a tradition of independence in Nevada, and we want to respect that tradition. Too often, people and businesses view regulators as an impediment, but I want my office to be a resource for those who want to grow their business."

Making It Work
To file for an NSRO, your company must first be incorporated in the state. The filing requires significant paperwork, including a thorough business plan and an in-depth audit. "Getting through compliance is pretty grueling," says Mike Murphy, CEO of MK Automotive, a Las Vegas-based chain of auto repair shops. He plans to franchise with the money he raises through the NSRO. "You undergo the same scrutiny a very large company would, and the challenge is taking a small company and making it fit into rules designed for large companies."

Most entrepreneurs using the NSRO outsource the legwork to a consultant or at least a lawyer or accountant who is familiar with securities registration. Murphy hired Public Company Management Corp., a consulting firm in Las Vegas that specializes in raising capital for small businesses. After the paperwork is submitted, it usually takes only a couple of months to be approved, Apenbrink says.

Once you've cleared the registration hurdle, the next challenge is selling your stock. Nevada allows a business owner to serve as his own "agent of the issuer," or salesperson of the stock, but it can be difficult to juggle the added responsibility. "I was serving as my own agent of the issuer, but I've learned I can't do it in my spare time," Murphy says. "So I'm talking to a couple of people about taking on that role."

Trussell agrees that a motivated agent is crucial. "Make sure you have someone in line to raise the money, an agent of the issuer in Nevada who's a go-getter and will go out there and get it raised," he says. "If not, it's probably better to do it in your own state. I have a Rolodex of people I could call in Texas, but [when selling in another state], it takes a while to build rapport."

Selling anything is challenging these days, but NSRO companies are betting that it's doable. Trussell purchased a list of 7,500 qualified investors in Nevada and he's contacting them all by direct mail. Murphy says he looks for "people who can pull the trigger on their own investments" and who may be burned out on Wall Street and hopeful about a promising, profitable small company. As investors write checks, all the money goes into escrow and cannot be withdrawn until the offering is complete, providing an extra layer of protection for investors.

"The whole key is getting to the point of raising money as fast as possible," Chang says. "And you can get there quicker in Nevada."